BoE announce interest rate rise

[Darkandstormynite]

Just seen BoE has confirmed interest rate to rise to 4.5%

AIBU to think we haven't reached the top yet and there's more to come?

Yes. The UK printed money in order to facilitate lockdown, which not everywhere did, and as such it's completely unsurprising that we're now experiencing the effects. But that's only one factor, of many.

The rot set in a long time before 2020, and we wouldn't be nearly so badly off now if this were only about lockdown. Actually many of these problems were baked in a long time before covid because of what we've done since 2008.

We were exposed to a higher level pre 2008, probably also a factor

Could be.

You really liked that link! 😂😂

I remember them higher than this during the time I've had a mortgage

How much was that mortgage vs your earnings?

What I want to know is - it's supposed to curb spending - who are all these people who are supposedly spending too much?

Lots of people have no mortgage or small ones, don't work anymore or have other income. And many have substantial savings, some built up during covid.

How much interest did you pay? Total. Assume you’ve paid your mortgage off?

what’s the current value of your property(s)?

It’s not bollox it was a conversation I was party to a few weeks ago, they said that they thought that the BoE would raise the bR one more time to 4.5% and then that would be it in terms of BR rises. Then inflation would start to level out across this year, which is that not what you just said 5% at the tail end of the year?

They will go up more yet. The terrifying bit is that the government has no joined up thinking on its policy decisions on the housing market. So, they made it that buy to let landlords can't offset all of the interest they pay. That was fine when interest rates were low as it was only affecting profit margin to a small extent. Now, interest rates rising mean that some landlords need to get out. People still need somewhere to live so rents go up.

Local councils have failed to invest in social housing. Private landlords are increasing rents to frankly ridiculous levels. We are well into 6 figures household income and i have found our recent £500 a month mortgage increase a struggle with other rising costs and £100 a month will be devestating to some families.

Meanwhile landlords are expected to pay on income tax on money that is not profit as well as capital gains tax when disposing of the asset. Of course they are getting out which will raise rents further. In my city there are career landlords with 100's of properties. As they hold those properties in limites companies they can claim all their costs back. They don't ever drop the rent as they control the market. We are literally sleepwalking into private rentals being owned by big business. Its very scary and anti competitive and will force prices out of the reach of so many people as the corporations can take such a long view.

Even if prices plummet (which is unlikely anyway, maybe a 10% correction) housing will be unaffordable to many due to the interest rate.

What the government should have done is increased regulation, made landlords need to be licensed and regularly third party inspected (and pay for that) so that the overal quality of rental property is increased and reduced the likelihood that people can be turfed out of their home on a whim (unless they don't pay their rent). The ridiculous policy introduced actually means that there is little incentive for landlords to maintain properties which is insane.

Anyone rubbing their hands at savings rate rises might want to look at the effect of inflation - real v nominal dimension might affect spending power/income/value of savings as well as pay rises. In practice, though receiving more interest might feel good, the era of no inflation, next to no interest rates for savings might make a saver better off than 5% interest in a 10% inflationary environment.

Why should landlords be treated differently from any other business for taxation purposes ? If you give landlords tax breaks all it does is encourage people with cash to invest in housing, increasing prices and shutting private buyers who want a home not an investment out of the market.

Maybe councils should buy out the private landlords or build more houses ?

The government(s) has massively increased regulation over the past few years. There is now deposit protection, minimum house EPC requirements, electrical and gas safety inspections, the list goes on. Evicting tenants is now quite difficult.

Personally I think private landlords should be taxed out of existence and more council houses should be built.

This appears to be the way we are heading, with Sadiq Khan overseeing an increased program of house building in London recently. There is a lot more to do, but it is at least a start.

I was paying over 6% at one stage. I still have a (small) mortgage as I've moved house a couple of times - mortgage cost isn't hitting me that hard because the mortgage is small - it's all the other costs.

Meanwhile landlords are expected to pay on income tax on money that is not profit as well as capital gains tax when disposing of the asset. Of course they are getting out which will raise rents further. But won't that also mean there are more houses to buy? When DS bought his first help, everything in his price range was marketed as "Suit first time buyer or BTL". Take out the BTL and that's more houses for first time buyers. That in turn will reduce the number of people wanting to rent. So it's a complex interlinked situation.

We are literally sleepwalking into private rentals being owned by big business

It's not sleepwalking. We are being driven there in a bloody big bus. This is exactly what the people who pay the Tory party have bought.

What the government should have done is increased regulation, made landlords need to be licensed

Or just invest in a lot more social housing

Far better to invest in tax breaks for landlords.

@frankgu but where ia that money coming from? I agree we need more social housing but that is a long term goal not immediate.

@GasPanic i'm suggesting
Landlords should not be treated differently than any other business. All other businesses can offset their third party arms length borrowing costs.

Private landlords and social housing are two different issues and there is a place for both.

Proper long run data, not just back to 1975 because that's all the BOE currently have on their website - the base rate is usually between 3.5% and 6%

If they are a business they can incorporate and be treated identically same as any other business surely.

Property speculation is a cancer on society. We don't allow speculation in any other assets essential for living like food. What would happen if one person started hoarding all the food and driving prices up ? There would be an end point to that very quickly yet for some reason in housing it is celebrated.

The sooner the end point comes for property as a speculative asset the better. It will drive down living costs, boost the economy (people would have more to spend on stuff instead of having to put ever increasing amounts of money into mortgages) and allow people with decent jobs that do good in society that have been priced out the marketplace to own their own home.

The more landlords sell up the better. Sure there will be a period of pain during the transition. But the end point is a much better society for everyone.

Offset against the long term saving in housing benefit. I work in this sector - a few years ago we estimated you'd need about £7bn in investment to house everyone in need of a social rented property each year, but you'd be saving £28bn in perpetuity, plus creating a publicly owned asset which has long term value for the country. The current policy of supporting private rents with housing benefit is just a state to private wealth transfer racket.

(and institutional investment in the private rented sector is good, because ultimately they are all backed by pension funds, so it's another way for everyone to share in housing wealth, rather than it being concentrated in the hands of certain individuals who were able to buy in a favourable market.)

I think it is important to remember that the main purpose of government is to enrich those that pay for them. Who was it that Jenrik spent all those dinners with when he was minister for not building houses?

I think it is important to remember that the main purpose of government is to enrich those that pay for them.

It has become that. It didn't start out like that. In my youth (i.e. last century) my discussions around politics centred on the role of government is fundamentally to protect those within it's walls (piss easy on an island). That protection obvious starts with "-from invasion and hostile actors" and then trickles down to regulating trade and commerce to ensure prosperity and thus the population are in a sense protecting themselves.

Autarky may have been mentioned. But only after shots.

Sadly the take home from those days was an insightful analysis of over a century ago:

A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship

Anyone care to speculate where we are on that journey ?

but where ia that money coming from? I agree we need more social housing but that is a long term goal not immediate

@nowinhouse the money used to pay landlords now in housing benefit which is a colossal waste. Like everything too much short term thinking

@witheringrowan exactly

I agree not allowing private landlords to be paid housing benefit would be a massive step forward. Most quality landlords don't accept it anyway as its set too low. Housing benefit should be for social housing.

But i don't agree that private landlords renting to people without state support should be curtailed as the inevitable result of that is higher rents for people who are not relying on state intervention. It shouldn't affect those in receipt of housing benefit.